Update: Gearbox Software has been approached by Microsoft to make a new Halo game, according to Variety.

"Gearbox has definitely had conversations with Microsoft about doing a new 'Halo' game and is very excited at the prospect," says writer Ben Fritz, relaying a conversation with an anonymous source "close to Gearbox."

Original Story: Halo 4 is in development at Gearbox Software and will launch alongside the Xbox 720, going by a rumor in the latest issue of Official Xbox Magazine, as relayed by Joystiq.

"It's big. It's, like, look-at-our-line-up-and-imagine-something-even-bigger kind of big," Gearbox president Randy Pitchford wrote on the company's forum back in February. "When you find out what this is, you'll likely agree that I can't oversell this one."

Following Bungie's departure from Microsoft last year, Microsoft retained ownership of the Halo property--arguably the biggest and most popular Xbox-exclusive series. At the time, both companies were said to be "focused on the continued success of the 'Halo' franchise."

Meanwhile, the next Xbox--often referred to as the Xbox 720--is expected to arrive in 2012, according to major industry figures.